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Friday, 27 September 19
LOWDOWN ON INCOTERMS 2020 OVERHAUL - BALTIC EXCHANGE
 KNOWLEDGE TO ELEVATE
This ninth revision of Incoterms is changed in style and substance. The revisions improve certain aspects of Incoterms 2010 and address issues which were not prevalent in 2010. The introduction to Incoterms 2020 includes a detailed explanation of how to choose the most appropriate Incoterms rule for a sale contract.
Incoterms are a collection of internationally recognised standardised trade terms published by the ICC and widely used in domestic and international sales. Incoterms cover various practical elements of a sale contract such as the primary obligations of the seller and the buyer; the responsibilities of each; time of delivery and the transfer of risk. They also deal with insurance, export and import clearance and the division of other costs pertaining to the delivery of goods.
The ICC’s revision of Incoterms aims to respond to changes in the market so that they continue to be relevant and useful to global trade. With this particular revision, the ICC aims to take account of:
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The growth of the global economy and greater access to markets worldwide
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Increasing attention to security in the transportation of goods
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The need for flexibility when considering insurance coverage, depending on type of goods and transport
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Calls from banks for an on-board bill of lading in some financed sales under the Free Carrier (FCA) rule
For existing contracts, Incoterms 2010 will continue to apply even if performance of the contract will take place in 2020 unless the contract says otherwise. For contracts entered into between September 2019 and January 2020, it is prudent for the parties to state which set of Incoterms is to apply, especially if performance will take place after 1 January 2020.
After 1 January 2020, courts and arbitrators can be expected to assume that any reference to Incoterms in new contracts is intended to be a reference to Incoterms 2020, unless there is evidence to the contrary.
The relevance of Incoterms 2020 depends on the contract terms used. For example, GAFTA, FOSFA and sugar (SAL and RSA) contracts do not incorporate Incoterms. Any parties trading only on those contract terms without amending them to incorporate Incoterms will obviously be unaffected by the changes in Incoterms 2020. Standard petroleum product contracts refer to Incoterms, as do many ethanol, coal and metals contracts. Parties dealing with such contracts will need to:
• Check their standard contract forms
• Consider the changes introduced by Incoterms 2020 and whether they wish their contracts to incorporate Incoterms 2020 or an earlier version of Incoterms (or none)
• Make any necessary consequential changes in the standard forms for new contracts (for example, changing ‘DAT’ (Delivered at Terminal) to ‘DPU’ (Delivered at Place Unloaded))
• Inform counterparties and trading/execution departments of the changes to Incoterms and any revisions to contract documentation
Main changes
1. Bills of lading with an on-board notation in FCA deliveries
2. Different levels of insurance cover between Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP)
3. Acknowledging the use by parties of their own transportation in FCA, Delivered At Place (DAP), DPU and Delivered Duty Paid (DDP) deliveries
4. The inclusion of security-related requirements within carriage obligations and costs
5. Detailed Explanatory Notes for Users
6. The arrangement of provisions relating to costs
7. Change of ‘DAT’ to ‘DPU’
The detail
The table below sets out the substantive changes in more detail:
1. Bills of lading with an on-board notation in FCA deliveries
Amendments to Incoterms 2020
In FCA deliveries, parties (or their financing banks) often require a bill of lading with on-board notation but, given that delivery on FCA terms is completed before goods are loaded onto the vessel, the seller may not always be able to obtain an on-board bill of lading from the carrier.
Under the new Incoterms, the buyer and the seller may agree that the buyer will instruct its carrier to issue an on-board bill of lading to the seller after the goods have been loaded. The seller will then be obliged to tender the bill of lading to the buyer.
The ICC emphasises that, where the above option is exercised, the seller does not take on an obligation to the buyer in respect of the terms of the contract of carriage.
2. Different levels of insurance cover in CIF and CIP
Amendments to Incoterms 2020
Incoterms 2020 provide for different minimum insurance cover for CIF and CIP deliveries.
Previously, both CIF and CIP required minimum insurance cover at the level of Clause (C) of the Institute Cargo Clauses.
In the new revision, for CIF deliveries, the default position remains the same (that is, Clause (C) of the Institute Cargo Clauses). Parties may agree higher levels of cover if they wish.
However, for CIP deliveries, the seller is now obliged to obtain insurance cover at the level of Clause (A) of the Institute Cargo Clauses (that is, “all risks”).
Minimum insurance cover for CIP deliveries has therefore been increased for the benefit of the buyer. Parties are free to agree to have lower levels of insurance cover if they wish.
3. Acknowledging transportation by own transport in FCA, DAP, DPU and DDP deliveries
Amendments to Incoterms 2020
Incoterms 2010 were drafted on the assumption that, when goods are carried from the seller to the buyer, they would be carried by a third-party carrier engaged by the seller or the buyer. That did not account for situations, particularly in FCA, DAP, DPU and DDP deliveries, where a third-party carrier was not, in fact, required or contracted because the seller or the buyer would use its own transportation.
The new rules now cater for such situations by expressly providing for the arrangement of carriage as well as referring to the making of a contract of carriage.
4. Inclusion of security-related requirements within carriage obligations and costs
Amendments to Incoterms 2020
Incoterms 2020 aims to establish stronger security-related requirements than its predecessors. Now that security-related concerns are more prevalent in trade, this revision expressly provides for security-related obligations at A4 and A7 of each rule. As mentioned above, costs for these obligations will feature under A9/B9 of each rule.
5. Explanatory Notes for Users
Amendments to Incoterms 2020
The Guidance Notes that previously featured at the start of the individual Incoterms have now been amended to ‘Explanatory Notes for Users’. The Explanatory Notes set out the fundamentals of each of the relevant Incoterms, specifically:
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When it should be used
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When risk transfers
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How costs are allocated
The Explanatory Notes aim to help users choose the most appropriate Incoterms and provide guidance for interpretation if disputes arise.
6. Arrangement of provisions relating to costs
Amendments to Incoterms 2020
Costs have been rearranged in the 2020 revision. All costs relating to the various aspects of the sale are now listed at A9/B9 under each of the Incoterms, as well as under the relevant article within the Incoterms to which they apply.
The intention behind this change is to provide users with a complete list of costs in one place, so that the seller and the buyer are more aware of the costs for which each will be responsible under particular Incoterms.
7. Change from ‘DAT’ to ‘DPU’
Amendments to Incoterms 2020
There is a change to the order of the individual Incoterms in the new revision, so that DAP now appears before DAT to reflect the fact that delivery on DAP terms occurs before delivery on DAT terms.
The term ‘DAT’ has been changed to ‘DPU’, reflecting the fact that the destination for a DAT/DPU delivery could be at any place and not just a terminal. Of course, the place of delivery, if not a terminal, must be appropriate for the unloading of the goods.
As John W.H. Denton, General Secretary of the ICC, said when Incoterms 2020 were released: “Incoterms 2020 rules make business work for everyone by facilitating trillions of dollars in global trade annually. Because they help importers and exporters around the world to understand their responsibilities and avoid costly misunderstandings, the rules form the language of international sales transactions, and help build confidence in our valuable global trading system.”
The importance of Incoterms to trade is beyond doubt, even if many contracts do not incorporate them. To avoid uncertainty and disputes, trading companies should ensure they know the new Incoterms rules and make any amendments to their contracts and general terms and conditions that are necessary. It is important to ensure that the most appropriate Incoterms are selected for each contract and that they are fully understood before they are incorporated. These points are especially important now, as the changes take root.
Source: Baltic Exchange
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Monday, 18 November 19
SUPRAMAX: IN THE INDONESIAN COAL BUSINESS, A 58KDWT VESSEL FIXED DELIVERY PHILIPPINES, REDELIVERY INDIA AT CLOSE TO $8,000 - BALTIC BRIEFING
Capesize
For most of the week the rates were nudging up under a flurry of activity in the Pacific as levels for the West Australia to China C5 ...
Saturday, 16 November 19
LIFE AFTER FOSSIL FUELS: THE DAYS OF OIL AND COAL TRANSPORTATION ARE NUMBERED - BALTIC EXCHANGE
With the world fiercely focused on a decarbonised future, fossil fuel movers and traders might rightly be reconsidering their future. But cast a wi ...
Saturday, 16 November 19
OIL MARKET REPORT: PAUSING TO REFLECT - IEA
Global oil demand in 3Q19 increased by 1.1 mb/d year-on-year (y-o-y), more than double the 435 kb/d seen in 2Q19. China’s demand increased by ...
Friday, 15 November 19
RISING ENERGY DEMAND IN SOUTHEAST ASIA TO BE MET AND SUPPORTED BY COAL - WORLD COAL
Last week the International Energy Agency (IEA) released its semi-annual Southeast Asia Energy Outlook report which outlines the latest insights in ...
Thursday, 14 November 19
EIA EXPECTS U.S. STEAM COAL EXPORTS TO FACE INCREASING COMPETITION FROM EASTERN EUROPEAN SOURCES
EIA expects total U.S. coal production in 2019 to total 698 million short tons (MMst), an 8% decrease from the 2018 level of 756 MMst. The decline ...
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- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
- Ind-Barath Power Infra Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Chamber of Mines of South Africa
- Global Coal Blending Company Limited - Australia
- Parry Sugars Refinery, India
- IHS Mccloskey Coal Group - USA
- Directorate Of Revenue Intelligence - India
- The University of Queensland
- Bahari Cakrawala Sebuku - Indonesia
- Australian Commodity Traders Exchange
- Electricity Authority, New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Power Finance Corporation Ltd., India
- Attock Cement Pakistan Limited
- Madhucon Powers Ltd - India
- Meralco Power Generation, Philippines
- Indian Oil Corporation Limited
- ASAPP Information Group - India
- Romanian Commodities Exchange
- Asmin Koalindo Tuhup - Indonesia
- Banpu Public Company Limited - Thailand
- Wood Mackenzie - Singapore
- Bhatia International Limited - India
- Holcim Trading Pte Ltd - Singapore
- SN Aboitiz Power Inc, Philippines
- Agrawal Coal Company - India
- Tata Chemicals Ltd - India
- GMR Energy Limited - India
- Price Waterhouse Coopers - Russia
- SMG Consultants - Indonesia
- Straits Asia Resources Limited - Singapore
- Bhushan Steel Limited - India
- Kumho Petrochemical, South Korea
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- Heidelberg Cement - Germany
- Xindia Steels Limited - India
- The State Trading Corporation of India Ltd
- Singapore Mercantile Exchange
- Kepco SPC Power Corporation, Philippines
- Ministry of Mines - Canada
- Ministry of Transport, Egypt
- New Zealand Coal & Carbon
- Thiess Contractors Indonesia
- Iligan Light & Power Inc, Philippines
- Bulk Trading Sa - Switzerland
- Miang Besar Coal Terminal - Indonesia
- Georgia Ports Authority, United States
- Leighton Contractors Pty Ltd - Australia
- Oldendorff Carriers - Singapore
- Binh Thuan Hamico - Vietnam
- Toyota Tsusho Corporation, Japan
- Indian Energy Exchange, India
- GVK Power & Infra Limited - India
- PowerSource Philippines DevCo
- Eastern Coal Council - USA
- Savvy Resources Ltd - HongKong
- LBH Netherlands Bv - Netherlands
- Goldman Sachs - Singapore
- Anglo American - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Cement Manufacturers Association - India
- Meenaskhi Energy Private Limited - India
- San Jose City I Power Corp, Philippines
- Barasentosa Lestari - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kaltim Prima Coal - Indonesia
- Orica Mining Services - Indonesia
- Maheswari Brothers Coal Limited - India
- London Commodity Brokers - England
- Grasim Industreis Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Karaikal Port Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Merrill Lynch Commodities Europe
- Petron Corporation, Philippines
- Africa Commodities Group - South Africa
- Bangladesh Power Developement Board
- Ambuja Cements Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining Corp, Philippines
- CNBM International Corporation - China
- Gujarat Electricity Regulatory Commission - India
- White Energy Company Limited
- Essar Steel Hazira Ltd - India
- Trasteel International SA, Italy
- Chettinad Cement Corporation Ltd - India
- Latin American Coal - Colombia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Renaissance Capital - South Africa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Pendopo Energi Batubara - Indonesia
- MS Steel International - UAE
- Bukit Baiduri Energy - Indonesia
- Medco Energi Mining Internasional
- Bhoruka Overseas - Indonesia
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Videocon Industries ltd - India
- Gujarat Sidhee Cement - India
- Rio Tinto Coal - Australia
- OPG Power Generation Pvt Ltd - India
- Baramulti Group, Indonesia
- IEA Clean Coal Centre - UK
- AsiaOL BioFuels Corp., Philippines
- Global Green Power PLC Corporation, Philippines
- Uttam Galva Steels Limited - India
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- Central Java Power - Indonesia
- Billiton Holdings Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
- Makarim & Taira - Indonesia
- Global Business Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Interocean Group of Companies - India
- Krishnapatnam Port Company Ltd. - India
- Salva Resources Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Simpson Spence & Young - Indonesia
- Timah Investasi Mineral - Indoneisa
- Coastal Gujarat Power Limited - India
- Vedanta Resources Plc - India
- Aditya Birla Group - India
- Globalindo Alam Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Edison Trading Spa - Italy
- Sical Logistics Limited - India
- The Treasury - Australian Government
- VISA Power Limited - India
- Borneo Indobara - Indonesia
- Australian Coal Association
- Energy Development Corp, Philippines
- Manunggal Multi Energi - Indonesia
- Indo Tambangraya Megah - Indonesia
- CIMB Investment Bank - Malaysia
- Semirara Mining and Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Bharathi Cement Corporation - India
- Kapuas Tunggal Persada - Indonesia
- Coal and Oil Company - UAE
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indika Energy - Indonesia
- Vizag Seaport Private Limited - India
- Altura Mining Limited, Indonesia
- Marubeni Corporation - India
- Antam Resourcindo - Indonesia
- Mjunction Services Limited - India
- Ministry of Finance - Indonesia
- Mintek Dendrill Indonesia
- Malabar Cements Ltd - India
- Star Paper Mills Limited - India
- ICICI Bank Limited - India
- Sree Jayajothi Cements Limited - India
- Alfred C Toepfer International GmbH - Germany
- Larsen & Toubro Limited - India
- Deloitte Consulting - India
- Petrochimia International Co. Ltd.- Taiwan
- Planning Commission, India
- Ceylon Electricity Board - Sri Lanka
- Orica Australia Pty. Ltd.
- Siam City Cement PLC, Thailand
- South Luzon Thermal Energy Corporation
- Thai Mozambique Logistica
- PetroVietnam Power Coal Import and Supply Company
- Indonesian Coal Mining Association
- Formosa Plastics Group - Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Carbofer General Trading SA - India
- SMC Global Power, Philippines
- Mercator Lines Limited - India
- Energy Link Ltd, New Zealand
- Indogreen Group - Indonesia
- Central Electricity Authority - India
- Metalloyd Limited - United Kingdom
- Lanco Infratech Ltd - India
- Wilmar Investment Holdings
- PTC India Limited - India
- European Bulk Services B.V. - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Sojitz Corporation - Japan
- Kartika Selabumi Mining - Indonesia
- PNOC Exploration Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- Siam City Cement - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Aboitiz Power Corporation - Philippines
- Minerals Council of Australia
- Economic Council, Georgia
- Posco Energy - South Korea
- Kobexindo Tractors - Indoneisa
- Eastern Energy - Thailand
- Sakthi Sugars Limited - India
- Kideco Jaya Agung - Indonesia
- Electricity Generating Authority of Thailand
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Mineral Development Corp Ltd - India
- Port Waratah Coal Services - Australia
- India Bulls Power Limited - India
- Samtan Co., Ltd - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Parliament of New Zealand
- Tamil Nadu electricity Board
- Riau Bara Harum - Indonesia
- Commonwealth Bank - Australia
- Sinarmas Energy and Mining - Indonesia
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